To Bail Out or not to Bail Out?

American Cotton Oil Company, American Sugar Company, American Tobacco Company, Chicago Gas Company, Distilling & Cattle Feeding Company, Laclede Gas Light Company, National Lead Company, North American Company, Tennessee Coal, Iron and Railroad Company, U.S. Leather Company, United States Rubber Company, General Electric.

How many of these companies sound familiar? Other than GE? Probably not too many, yet all were considered the pinnacle of American business when the Dow Jones Industrial Average was first published in 1896. Where did these companies go? Some merged with other more successful companies; some changed their business model so drastically they ceased to be the same company; others simply died. Capitalism has a way of dropping the deadwood and elevating what works.

This is incredibly apropos as the government weighs the advantages and disadvantages of bailing out the auto industry. Or to be more precise Detroit, as much of the auto industry is doing just fine, thank you very much. One only needs to travel a few hundred miles south to Alabama to see the proof. The Mercedes-Benz plant in Vance, Alabama, for example, announced it would double its production three years after opening; and Honda had a $450 million expansion in Lincoln, Alabama, that added another 2,000 jobs. For each job created inside an auto plant as many as eight are created in businesses outside.


Why are foreign auto makers flocking to the American South? First of all there is a readily available work force with the population in some southern states expected to grow as much as 40% over the next few decades- and it is nonunion as well. Companies are drawn to the South where there are no mandatory unions and where workers have resisted joining voluntarily. In addition to great work force potential, the local governments realize what a boon the car industry can be for their states. They offer hundreds of millions of dollars in incentives, such as tax abatements, site preparation and employee training.



Companies like Honda, Toyota and Mercedes-Benz are proving that if you make a quality product people will buy it. And states like Alabama are showing how governments can work with business to promote growth that is beneficial to state and company alike. What we need are more American companies performing like this. We need the next generation of Henry Fords out there to make the leap into lighter and more efficient cars, even the holy grail of alternative power vehicles. It is possible; but only if we allow the marketplace to turn the page on the past.

So weshould think long and hard before we decide to bail out Detroit. Are we simply giving a hand out to a modern day Laclede Gas Light Company? Shouldn’t we let capitalism work and let the strong and well run companies survive while those that refuse to adapt to the changing economy and world go the way of the gas light?

Post sponsored by Quality-Resumes.